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Zimbabwe economy weakens further

ZIMBABWE’S economy is expected to weaken further this year after growing by 3,1% in 2014, the International Monetary Fund (IMF) said on Monday, while the Finance minister said Harare expects to clear its arrears to the fund in the next year.

The government forecasts growth this year of 3,2%, but analysts say weak commodity prices, patchy rainfall this season and company closures as a result of cheap imports and high interest rates will curtail economic growth.

“Growth has slowed down and we expect it to weaken further in 2015,” Domenico Fanizza, head of an IMF review team said. He told journalists that Zimbabwe had met all targets under the programme despite difficult economic conditions.

Zimbabwe’s foreign debt is $9 billion. It makes token monthly payments of $150 000 to clear $125 million in IMF arrears. The fund says the government can only gain access to new finance if it clears the arrears and presents a credible plan to clear outstanding payments to foreign creditors.

“Our intention is that by this time next year, we should be entering the new phase of clearing our arrears,” Finance minister Patrick Chinamasa

Finance minister Patrick Chinamasa said within the next year, Zimbabwe should be looking at paying off the arrears.

“Our intention is that by this time next year, we should be entering the new phase of clearing our arrears,” Chinamasa said at the same press conference with Fanizza.

Fanizza said Zimbabwe was looking at ways to cut a wage bill that takes 82% of total government revenues and modify investment laws to attract foreign investors.

Foreign investors often point to the government’s policy of forcing foreign-owned firms to sell a majority of shares to locals as an impediment to investment.

Chinamasa said the government now wanted to determine how much it owes to whites evicted from farms in the last 15 years to bring to an end an issue that has divided the country along racial and political lines.

President Robert Mugabe has previously said former colonial power Britain was responsible for paying white farmers. But Chinamasa said even though Harare did not have the money, it was important to acknowledge what it owed to farmers.